maturity.62 And where the payee of a note has died and his wife acting as sole executrix indorses the note to a third person, the latter, in order to maintain an action thereon, should show authority to make the indorsement either by the will or by an authenticated or proved copy. § 163. Corporate want of authority as affected by illegality or statute.-Except where it is provided by statute that a bill or note issued by a corporation shall be void, such an instrument, which does not appear upon its face to be illegal or unauthorized, will not in the hands of a bona fide holder without notice, who has paid a valuable consideration therefor, be subject to the defense that it is illegal or issued without authority. And although a state will not enforce foreign laws in contravention of its own policy, yet if a note is made to a foreign corporation the maker will not be permitted, as against a bona fide holder, to set up in defense. to an action on the note that the corporation is not, by reason of non-compliance with the state laws, authorized to do business within the state, where such laws do not declare that contracts made with such corporation shall be void.65 So although a statute provides that a note taken for insurance premiums shall express such fact upon its face, and that it shall not be collectible unless the company or its agents shall have fully complied with the laws of the state in reference thereto, this will not be a defense to an action on such note by a purchaser of the same for value before maturity, as the object of such a statute is to prevent unauthorized companies from doing business within the state and not to deprive a bona fide holder of commercial paper of his legal rights. 62 Hamilton v. Pleasants, 31 Tex. 638, 98 Am. Dec. 551. 63 Russell v. Russell, 1 MacArthur (8 D. C.) 263. Where estate has received benefit of note by executrix she will be liable in her representative capacity. Ellis v. Littlefield, 41 Tex. Civ. App. 318, 93 S. W. 171. 64 Vallett v. Parker, 6 Wend. (N. Y.) 615; Pickaway County Bank v. Prather, 12 Ohio St. 497. 65 Press Co. v. City Bank, 58 Fed. Nor, in an action by a 321, 17 U. S. App. 213; Williams v. 66 Cook v. Weirman, 51 Iowa 561, 2 N. W. 386. bona fide holder of a note, can the illegality of such note, on the ground that it was given for an unauthorized purchase of stock, be set up.67 And where a note is given to a corporation formed for an illegal purpose, for consideration of dealings growing out of its illegal operations, a bank which has discounted the same before maturity and without notice will not be subject to a defense of such facts.6 68 Again, in an action by a bank upon a note or acceptance it is decided that the organization of the bank can not be inquired into for the purpose of a defense.69 It has, however, been determined that the payor of a note which has been transferred by an officer of an insurance company may, where he is a creditor of the company, contest the validity of such transfer so that he may avail himself by way of set-off of existing equities between him and the company.70 And it has been held in the federal courts that it may be shown in defense to an action on a bill or note, even by one who is a bona fide holder, that such paper was executed by a corporation in violation of an express statute.71 But where a note is executed to a foreign corporation which has not complied with the statute of the state relative to the transaction of business in the state without a permit, it is enforceable by a bona fide indorsee for value before maturity.72 So under a national banking act conferring no authority on national banks to purchase notes, it has been decided that no title is acquired by them to notes which they have purchased and that they can not recover thereon.73 § 164. Want of authority of corporate officers or agents.— The fact that an officer or agent of a corporation either abuses or disregards or exceeds his authority in the issuance or transfer of a corporate bill, note, or certificate of deposit, is no defense to an action upon such instrument by an innocent holder without notice 67 City Bank v. Barnard, 1 Hall (N. Y.) 80. 68 Burton v. Stewart, 62 Barb. (N. Y.) 194. 69 Southern Bank v. Williams, 25 Ga. 534; Smith v. Mississippi & A R. Co., 6 Smedes & M. (Miss.) 179. 70 Litchfield v. Dyer, 46 Maine 31. 71 Root v. Godard, 3 McLean (U. S.) 102, Fed. Cas. No. 12,037; Hay den v. Davis, 3 McLean (U. S.) 276, Fed. Cas. No. 6,259. 72 State Bank v. Holland, 103 Tex. 266, 126 S. W. 564. 73 Lazear v. National Union Bank, 52 Md. 78, 36 Am. Rep. 355; First Nat. Bank v. Pierson, 24 Minn. 140, 31 Am. Rep. 341. But see National Pemberton Bank v. Porter, 125 Mass. 333, 28 Am. Rep. 235. and for value where the transaction is properly one which may pertain to the business of such corporation,74 or where the corporation has received the proceeds and may be said to have ratified or assented to the act of such officer.75 "Proof of apparent authority of a corporate officer to contract in its behalf prima facie establishes actual authority so to do, and evidence of want of such authority will not relieve the corporation from the burden of a contract made with reasonable reliance upon such apparent authority, if such corporation is responsible for such appearance. But if a note is given in a transaction which does not affect the business of the corporation and it does not appear that the officer had any authority by bylaw or resolution to so act, or there is no recognized course of business by which he is held out as possessing such power, it has been decided that such facts will be a good defense even as against a bona fide holder.77 74 Irwin v. Bailey, 8 Biss. C. C. (U. S.) 523, Fed. Cas. No. 7,079; Allen v. West Point Co., 132 Ala. 292, 31 So. 462; Myer v. Brown, 65 Cal. 583, 26 Pac. 281; Standard Cement Co. v. Windham, 71 Conn. 668, 42 Atl. 1006; Jones v. Stoddart, 8 Idaho 210, 67 Pac. 650; Rock v. Stinger, 36 Ind. 346; Johnson v. Buffalo Center State Bank, 134 Iowa 731, 112 N. W. 165; Davis v. West Saratoga Building Union, 32 Md. 285; Bird v. Daggett, 97 Mass. 494; St. Louis Perpetual Ins. Co. v. Cohen, 9 Mo. 421; Merchants Bank v. McColl, 6 Bosw. (N. Y.) 473; Exchange Bank v. Monteath, 26 N. Y. 505; Bank of New York v. State Bank, 9 N. Y. 619; National Park Bank v. German American Mut. W. & S. Co., 21 Jones & S. (N. Y.) 367; Grant v. George C. Treadwell Co., 82 Hun (N. Y.) 591, 31 N. Y. S. 702; Citizens Sav. Bank v. Blakesley, 42 Ohio St. 645; Manhattan Liquor Co. v. Mangus, 43 Tex. Civ. App. 463, 94 S. W. 1117; Manhattan Liquor Co. v. German Nat. Bank (Tex. Civ. App.), 94 S. W. 1120. Compare Davis v. Rockingham Inv. Co., 89 Va. 290, 15 S. E. 547. 9976 75 Cadillac State Bank v. Cadillac Stave & Heading Co., 129 Mich. 15, 88 N. W. 67, 8 Det. L. N. 851; Grant v. Treadwell Co., 82 Hun 591, 31 N. Y. S. 702, 64 N. Y. St. 388; Webster v. Whitworth (Tenn. Ch. App. 1901), 63 S. W. 290. See also, First Nat. Bank v. Commercial &c. Home Assn., 185 N. Y. 575, 78 N. E. 1103. 76 Bullen v. Milwaukee Trading Co., 109 Wis. 41, 85 N. W. 115. 77 Wahling v. Standard Pump Mfg. Co., 9 N. Y. S. 739; Dexter Sav. Bank v. Friend, 90 Fed. 703. Compare Eaton v. Berlin, 49 N. H. 219. "The officers of a corporation have no power to authorize the execution of a note as surety for another in respect to a matter having no relation to the corporate business and in which the corporation has no interest. Such a transaction is not within the scope of its business, and a party receiving such a note with notice of the circumstances under which it is given can not recover on it." Hall v. Auburn Turnpike Co., 27 Cal. 255, 257, 87 Am. Dec. 75. Unauthorized accommodation paper issued by corporation officers. Cook v. Ameri 1 § 165. Want of authority of corporate officers or agentsApplication of rules-Illustrations.-Where a treasurer of a corporation has power to accept drafts the fact that certain drafts were accepted by him without authority and contrary to the provisions of the bylaws of the corporation is no defense to an action on such paper by one who is a bona fide holder.78 So where the president and treasurer of a corporation had authority to sign and put in circulation commercial paper in furtherance of and in the regular course of business of the corporation and he abused his authority and gave paper for the accommodation of a stranger and it came into the hands of an innocent holder the corporation was held bound thereon.79 In determining whether the president of a corporation had authority to indorse the name of the corporation on notes, the question of express authority is not alone to be considered, but also whether, in view of his official position, the scope and character of his duties, and his previous known conduct, there was such apparent authority as to justify plaintiff in accepting the notes indorsed by him under his official title.80 And where the president of a corporation was authorized by resolution of the directors to incur debts, negotiate loans and contract for the company, recovery on a note executed by the president alone could not be defeated by the fact that it was provided for by a by law of the corporation that notes signed by the president and secretary should be binding, such provision not requiring that all notes should be signed by the secretary.81 So where a corporation sent its assistant secretary, who had executed contracts in its behalf, to another state. to superintend its business there and with its knowledge and assent such officer opened an account with the bank in the city where he was sent, it was decided that the corporation could not, by setting can Tubing &c. Co., 28 R. I. 41, 65 78 Credit Co. v. Howe Mach. Co., 79 Dexter Sav. Bank v. Friend, 90 Fed. 703. Corporation liable on guaranty of president. See Lloyd v. Mat thews, 223 Ill. 477, 79 N. E. 172, 7 L. R. A. (N. S.) 376, 114 Am. St. 346. 80 Knapp v. Tidewater Coal Co., 85 Conn. 147, 81 Atl. 1063. 81 McCormick v. Stockton & T. C. R. Co., 130 Cal. 100, 62 Pac. 267; examine Third Nat. Bank v. Laboring Man Mercantile & M. Co., 56 W. Va. 446, 49 S. E. 544, holding a president has no inherent power to bind corporation by note. up the defense of want of authority, defeat recovery on notes given by such officer in the company's name, to cover overdrafts made of the company's account, of which it had knowledge, the amount of such notes having been placed to the credit of the company by the bank in the pass book of the contents of which the company was held to have notice and being checked against and withdrawn by the officer in charge of the account apparently so far as the bank could see for the company's business.82 But, where the treasurer of a corporation had no authority to execute corporate notes, the corporation is not bound by a note issued by him for the accommoda 82 Hennesey Bros. v. Memphis Nat. Bank, 129 Fed. 557. The court said in this case: "The notes served every purpose which would have been subserved if the company had made equivalent deposits on those dates. The bank required the overdrafts to be paid, and, instead of cash, it took these notes. The authority which the company intrusted to Evans, or the exercise of which it apparently sanctioned, was sufficiently extensive to cover his dealing with the bank, including the giving of the notes. We are inclined to think that his general authority, coupled with that which was given him to open an account and transact the business of his company with the bank, was sufficient to justify his covering of the overdrafts which he had made in the company's behalf, and of which the company had the benefit. If he had made the company's note, and negotiated it with the bank, professedly for the company's business, and secured a loan of money thereon, which he used in the company's business, could it be doubted that the company would be bound by his act? We think not. If his use of the proceeds was that of paying an overdraft owing by the company, would not that be devoting it to the company's business? But there could be no distinction between such a transaction as that which occurred and that supposed, except in mere form, on which the law would lay no stress. But it was indisputably proved that the company knew that overdrafts were occurring. It took no precautions to prevent them or to provide for their settlement. It must have been known that they had been provided for in some way and must be if they occurred again. The only reasonable inference is that it was intended by the company to leave the duty of attending to such contingencies to their superintendent who was in charge of the account. There is another feature of this case, however. The company had a pass book which was periodically balanced by the bank and returned to the company, that is, it was returned to its superintendent. * *The credits obtained by the notes were shown by the book. * The company is affected by notice of the contents of the pass book to the same extent as if the agent had been an honest one The contention of the defendant runs counter, as, indeed, does its entire defense, to the settled rule that, when one of two persons is to suffer by the act of an agent intrusted by his principal with the appearance of authority to do the act, that one shall take the burden whose agent committed the wrong. We think this is a plain case for the application of that doctrine." * * * * * |